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Fraudulent & Criminal Behaviour - Coggle Diagram
Fraudulent &
Criminal Behaviour
Insider Trading
(Capital Market & Services Act 2007)
Offences under CMSA 2007
Short selling
Market rigging
Stock market manipulation
Insider dealing
Definition
Purchase/ sale of companies securities
Effected by person who has knowledge of relevant but non-public material information/ price sensitive information, regarding the company
which may affect the stock price if made public
Price sensitive information is info which may:
Cause significant effect on the price of co's securities
Be considered important by a reasonable investor, in determining his choice of action
Who is insider?
Insider includes officer, employee, or agents of company, or officers of Stock Exchange
Price sensitive information are obtained in his capacity if insider
Prohibition
under CMSA 2007
Insider (who is in possession of price sensitive information) is prohibited from:
Acquiring/ disposing co's securities
Communicate the info to another person
Penalty
Criminal offence: Fine not less than RM1 million, AND imprisonment 10 years
Civil remedy to person who suffered loss/ damage due to the breach of insider trading provision
Defence
He did not expect there's a profit, or there's an avoidance of loss
Has reasonable grounds to believe that the info had been disclosed widely
Would have done what he did even without the info
Info is revealed while someone is doing their job/ working in their profession
Money Laundering
Definition
Process of funds from illegal means (such as drug trafficking, smuggling & corruption) are funneled through legal (financial) transactions
To conceal its illegal origin
Stages
(2) Layering
Illegal funds in financial systems are used to create complex transactions.
They will be (distanced from their source through) transactions purchase/sales of investment instrument
or through multiple transfer of funds from diff a/c from all around the world, to disguise as payments for goods and services.
It is to conceal its initial source
And to disguise the trail, by layering the illegal nature
(3) Integration
Integrate the illegal proceeds back into economy, as legitimate funds, through legitimate transaction
such as business ventures, luxury assets, lensing & investing
The re-injection of laundered proceeds back into economy
Re-enter the funds into financial system as normal business funds
(1) Placement
Illegal funds are
introduced into financial systems
.
They will be divided into smaller amount
and deposited (directly) into bank accounts or use them to buy gambling chips
Purpose is to move illegal funds away from its source
Offences
& Penalty
(1) Laundering
Fine of at least 5 times the sum (earned illegally), or imprisonment 15 years, or both
(2) Failure to report
Fine RM3 million, or imprisonment 3 years, or both
(3) Tipping off
Fine RM3 million, or imprisonment 3 years, or both
A criminal offence (in Malaysia) under Anti-Money Laundering Act 2001
CORRUPTION
& BRIBERY
Definition
Corruption is the act of:
giving/ receiving any gratification/reward
in form of cash/ in kind of high value
for performing a task in relation to job description
Offences
Soliciting/ Receiving gratification (Bribed)
Offering/ Giving gratification (To Bribe)
Intending to deceive (False claim)
Use office/ position for gratification (Bribe) (Abuse power/ position)
Penalty
Fine RM10,00 or 5 times the bribe value (higher one), AND
Imprisonment 20 years
Governed by Malaysian Anti-Corruption Commission Act 2009 (MACC)
MACC is to eliminate corruption, abuse of power & malpractice
Fraudulent Trading
Definition
In the event of winding up (or during legal proceedings against co), it appears that business has been carried on with intention to defraud creditors
Penalty
Fine RM1 million, or imprisonment 10 years, or both,
Directors involved will be disqualified from directorship
Person liable
Person who was knowingly as party to the carrying on of the business, shall be personally liable, WITHOUT ANY LIMITATION of liability, for ALL/ ANY of the debts, or other liabilities of the co as the court directs
Wrongful Trading
Definition
In event of winding-up, business are found to be continued to be carried on, knowingly there's no reasonable prospect of avoiding insolvency, and did not take reasonable steps to minimize potential loss to creditors
Person liable
Co gone into liquidation
Person who knew. ought to have known that there was no reasonable prospect that co would avoid going into insolvency
Director of that time
Penalty
Fine RM500k, or imprisonment of 5 years, or both
Defence
Directors may escape liability if they can prove that they took EVERY STEP to minimize potential loss to creditors